EPAct 179D Experts

"The least expensive kilowatt, is the one not used."

- Jacob Goldman

Hangars Generate the Largest EPAct Opportunity

Airports and the predicted future Aerotropolises need and will continue to
need large storage and maintenance facilities for the airplanes that are the
backbone of the international transport trade1. Airplane hangars
represent a large untapped opportunity for EPAct tax incentives, as they are
very similar in building type to warehouses 2, car repair
bays3, industrial4, and self storage
facilities5 in terms of building energy usage and their ability to
drive large tax deductions, due to their large square footage.

Hangars are ripe for taking the lead in energy efficiency because they are
large simple spaces where large energy and tax savings are easily achievable by
installing current generation energy efficient building products. Similar to
warehouses, the largest hangars use electricity that also goes to support
nearby major population centers where electricity is often supply constrained
and expensive which greatly increases the economic return from energy
efficiency measures.

The EPAct Tax Opportunity

If the building project does not qualify for the maximum $1.80 per square
foot immediate tax deduction, there are tax deductions of up to 60 cents per
square foot for each of the three major building subsystems: lighting, HVAC and
the building envelope. The building envelope is every item on the
building’s exterior perimeter that touches the outside world including
roof, walls, insulation, doors, windows and foundation.6

Commercial Hangar Operators

In conjunction with the growth of airports, the production and support
facilities that are used to produce and maintain these aircraft will need to be
retrofitted and upgraded to current generation technology.

Examples of how large buildings and airport hangars can generate large EPAct
tax deductions are presented below:

Commercial Hangars

LEED Hangars

Below is a sample of some of Cessna’s larger aircraft hanger service
buildings:

Cessna National Hangar Facilities

Lighting

Lighting is generally the largest portion of hangar energy use. Standard
prior generation lighting for hangars was T-12 or metal halide lighting. T-12
and metal halide lighting are some of the least energy efficient types of
lighting as compared to today's T-8, T-5, induction and LED lighting. A
lighting retrofit can easily reduce lighting electricity costs by 40 to 80
percent8. LED's and induction lighting in hangars that are heated
only will kick in $1.20 and $1.80/sq ft tax deductions, where non-retrofitted
hangars with metal halide and T-12 fixtures will not qualify for EPAct.

Watts/Sq ft Targets to Receive $1.20 and $1.80/Sq ft

Section 179D utilizes building energy simulation models to confirm EPAct tax
deductions. This software compares actual building systems to simulated
reference building's systems. When a building models for just one system, HVAC
for example, the actual project building would have reference lighting,
reference envelope and actual project building HVAC. This would be compared to
all reference systems in the simulated reference building. If this model, which
holds all else constant, except for the HVAC can show a 15% overall building
energy cost improvement versus the simulated reference building, the owner of
the actual project building would receive $0.60/sq ft for the HVAC section.

Multiple systems can be combined to generate $1.20 and $1.80/sq ft EPAct
deductions. To receive the full $1.80/sq ft, buildings must show a 50% overall
energy cost reduction in all 3 systems versus the simulated reference building.
This model, however does not discriminate as to which system (lighting, HVAC,
or envelope) that the 50% savings comes from. All of the savings could be in
one system or spread out amongst the three. In the case of non-conditioned
hangars, since most of the energy use is in the lighting, if the watts can be
lowered enough the 50% can be reached just by retrofitting the lighting. The
targets to hit are .75 watts/sq ft or less for $1.20 and .45 watts/sq ft or
less for $1.80

Roofs

EPAct limits deductions to the lesser of what a project qualifies for, $0.60
or $1.20 or $1.80/sq ft or project cost. Most lighting retrofits, like the ones
described in the previous paragraph, only cost around $1.00/sq ft. In these
cases, if the full $1.80 is achieved, there is $0.80/ sq ft left over to apply
to a roof EPAct deduction. The building’s underlying characteristics
have already qualified for $1.80/sq ft but did not have the project cost. Now
with additional project cost in a roof improvement, the remaining $0.80/sq ft
tax incentive may be deducted.

Conclusion

The key to utilizing EPAct for hangars most efficiently is to realize that
retrofitting lighting alone is the key to qualify for large deductions. Once
the efficiencies are achieved by qualifying the full 50% energy cost reduction
versus the simulated reference building, just by retrofitting lighting, the
remaining deduction above the project cost can be used to improve the envelope,
in our example, the roof.